Slide 1: Q1 FY22 financial results
Steve Binnie Chief Executive Officer of Sappi Limited 09 February 2022 Q1 FY22 financial results 1
Slide 2: Forward-looking statements and Regulation G disclosure
Forward-looking statements and Regulation G disclosure Forward-looking statements Certain statements in this presentation that are neither reported financial results nor other historical information, are forward-looking statements, including but not limited to statements that are predictions of or i
Slide 3: Highlights Q1 FY22
Highlights Q1 FY22 Excluding special items* • Robust market demand in all product segments Performance exceeded • Higher selling prices offset rising costs expectations • Additional trading week EBITDA impact US$25 million • Pulp volumes +48% q-o-q; more shipping capacity secured for South African e
Slide 4: EBITDA reconciliation Q1 FY21 to Q1 FY22
EBITDA* reconciliation Q1 FY21 to Q1 FY22 Pulp – US$82m Packaging and speciality papers – US$58m Graphic papers – US$148m Purchased pulp – (US$95m) 480 Energy, wood, chemicals – (US$89m) 440 Delivery cost – (US$18m) 400 360 320 US$ million 280 240 200 160 120 Pulp – US$21m Packaging and speciality p
Slide 5: Product contribution split Last twelve months
Product contribution split Last twelve months EBITDA* excluding special items Sales volumes** 23% 21% 40% 54% 25% 37% * Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 21 in our Q1 FY22 financial results booklet (availa
Slide 6: Segment volume & EBITDA margin
Segment volume & EBITDA* margin Graphic papers Packaging and speciality papers 1,100 450 20% 1,000 8% 400 16% 900 350 Tons (‘000) Tons (‘000) 3% 12% 800 300 700 -2% 250 8% 600 200 -7% 4% 500 150 400 -12% 100 0% Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q3 21
Slide 7: Net debt/EBITDA development
Net debt/EBITDA* development 2,600 7.0 2,400 6.0 2.8 2,200 5.0 2,000 2,070 2,056 2,055 US$ million 4.0 1,977 1,957 1,946 1917 1,916 1,800 1,879 1.7 3.0 1,728 1,600 1,680 1,632 1,603 1,568 1,557 2.0 1,501 1,400 1,349 1,338 1,329 1,322 1,318 1,200 1.0 1,000 0.0 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18
Slide 8: Maturity profile
Maturity profile* Fiscal years 600 Includes 2026 2028 EUR450m bond EUR400m bond 538 500 481 400 US$ million 2032 373 US$221m bond 300 2025 ZAR1.3bn convertible bond** 200 221 83 100 68 95 94 27 27 19 66 21 47 0 2022 2023 2024 2025 2026 2027 2028 2032 Short-term SPH term debt Securitisation SSA * Exc
Slide 9: Capex
Capex 600 500 400 US$ million 300 200 100 0 2017 2018 2019 2020 2021 2022E* * Capital expenditure in FY22 is estimated to be US$395 million and includes approximately US$30 million of Saiccor expansion capex, US$80 million for cost optimisation and quality improvement projects and US$75 million for
Slide 10: Global ocean freight developments
Global ocean freight developments Schedule reliability drops to record-low in December 2021 WCI* decreased marginally by 0.5% to $9,376.70 per 40ft container 90% 80% 70% 60% 50% 40% 30% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018 2019 2020 2021 Source: Sea-Intelligence, GLP Issue 125. Sourc
Slide 11: Paper pulp prices
US$/ton 1,000 1,100 1,200 1,300 1,400 400 500 600 700 800 900 2-Jan 2-Feb 2-Mar 2-Apr Source: FOEX, CCF group, RISI. 2-May 2-Jun 2-Jul 2-Aug 2-Sep Paper pulp Prices 2-Oct 2-Nov 2-Dec 2-Jan 2-Feb NBSK Europe (US$) NBSK Europe (EUR) 2-Mar 2-Apr 2-May 2-Jun 2-Jul 2-Aug 2-Sep 2-Oct 2-Nov 2-Dec 2-Jan 2-F
Slide 12: Energy price volatility challenge
Energy price volatility challenge Natural gas market price remains extremely volatile Source: Screenshot of Dutch gas market price TTF on the 27 January 2022. Price in €/MWh. 12
Slide 13: Segmental overview
Segmental overview 13
Slide 14: Pulp Highlights Q1 FY22
Pulp Highlights Q1 FY22 • Hardwood DP market price decreased to US$905 per ton during the Sales tons +30% quarter • DP volumes, excluding BCTMP and market pulp, +48% q-o-q; more year-on-year** shipping capacity secured for South African exports • 54,000 tons of BCTMP and market pulp sales volumes in
Slide 15: Dissolving pulp market indicators
Dissolving pulp Market indicators Retail textile and apparel sales by region/country Dissolving pulp pricing vs Viscose staple fibre (VSF) Indexed 2017=100 Source: US Census, National Bureau of Statistics, Eurostat. Indexing by Hawkins Wright. Source: CCF Group. Estimates for the US are based on dat
Slide 16: Packaging and speciality papers Highlights Q1 FY22
Packaging and speciality papers Highlights Q1 FY22 • Markets continued to be robust in all regions Sales tons +26% • Successful implementation of price increases and product mix optimisation led to further progress in profitability year-on-year** • EBITDA +103% y-o-y** • The North American packaging
Slide 17: Graphic papers Highlights Q1 FY22
Graphic papers Highlights Q1 FY22 • Buoyant demand for graphic papers boosted sales volumes and Sales tons +20% provided support for price increases, which were necessary to offset significant cost inflation and restore EBITDA margins year-on-year** • All assets ran at full operating capacity during
Slide 18: Sappi Europe Highlights Q1 FY22
Sappi Europe Highlights Q1 FY22 • Renewed strong demand in domestic and export markets Sales tons +27% supported price increases across all paper grades year-on-year** • Implementation of an energy surcharge on all European products during the quarter was a key component to restore margins in the Eu
Slide 19: Sappi North America Highlights Q1 FY22
Sappi North America Highlights Q1 FY22 • Record first quarter EBITDA of US$89 million; more than Sales tons +8% triple the prior year year-on-year** • US$22 million negative impact of the Somerset Mill shut was partly offset by the additional trading week • Graphic paper selling prices +21% y-o-y**
Slide 20: Sappi Southern Africa Highlights Q1 FY22
Sappi Southern Africa Highlights Q1 FY22 • Y-o-y** profitability positively impacted by improved sales Sales tons** +37% volumes and pricing in all segments year-on-year*** • EBITDA +46% q-o-q despite significant cost rises and logistical challenges • Demand for DP was strong; introduction of breakb
Slide 21: Our business strategy Thrive25
Our business strategy Thrive25 What this means 2022 objectives Drive operational excellence • Achieve zero fatalities and LTIFR. • Strengthen our safety-first culture. • Maximise production outputs • Continuously improve our cost position. • Gain cost advantage through global footprint • Continue to
Slide 22: Our business strategy Thrive25: two phases
Our business strategy Thrive25 Two phases Phase 1 Strengthen balance sheet (2021 – 2022) Phase 2 Invest for profit growth (2022+) of strategic Objective Strategy Objective Strategy development— deleveraging Reduce debt and • Complete approved projects Invest in new growth • Further expand and invest
Slide 23: Sustainability is at the core of our business
Sustainability is at the core of our business 23
Slide 24: ESG - continuously rethinking what we do and how we do it
ESG - continuously rethinking what we do and how we do it Sustainability is embedded into Sappi’s business and work culture Sappi’s commitment to sustainable growth • Sappi Forests: 100% FSC certified, • Sappi Forests: 100% PEFC certified • Awarded Platinum Level in sustainability performance by ind
Slide 25: Outlook
Outlook 25
Slide 26: Outlook
Outlook • Demand for DP continues to be strong Pulp • The addition of breakbulk shipping is expected to aid in the reduction of the DP sales backlog • Underlying demand in the packaging and speciality papers Packaging and segment remains robust speciality papers • Recovery of graphic paper sales acr
Slide 27: Outlook Continued
Outlook Continued • Timber, pulp, chemicals, energy and delivery costs are expected to remain at elevated levels Cost inflation • In South Africa higher delivery, timber and chemical prices will impact margins for the pulp business • Global logistical challenges and vessel shortages are likely to co
Slide 28: Thank you
Thank you 28
Slide 29: Supplementary information
Supplementary information 29
Slide 30: EBITDA and operating profit excluding special items
EBITDA and operating profit Excluding special items* 300 250 240 224 200 211 161 197 148 187 142 185 177 128 172 150 US$ million 117 155 145 109 105 139 131 92 100 85 118 112 64 98 62 52 48 82 50 31 16 26 0 -5 -50 -52 -100 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY19 Q1 FY20 Q2 FY
Slide 31: Packaging and speciality papers Production facilities
Packaging and speciality papers Production facilities Alfeld Mill (Germany) Lanaken Mill (Belgium) Rockwell Solutions (Scotland) Flexible packaging, label paper, Functional paper Functional papers and flexible paperboard, containerboard, silicone packaging base paper, functional paper Carmignano Mil
Slide 32: Packaging and speciality papers Product portfolio
Packaging and speciality papers Product portfolio Flexible packaging Functional papers Containerboard Paperboard Label papers Silicone base Digital imaging Casting and papers papers papers release papers Dye sublimation papers 32
Slide 33: Packaging and speciality papers Volume growth 2015 to 2022
Packaging and speciality papers Volume growth 2015 to 2022 1,800 1,600 1,464 1,400 1,209 1,200 1,129 1,009 1,000 884 887 854 800 600 400 200 - 2015 2016 2017 2018 2019 2020 2021 2022F Flexpack Label Paperboard Self-adhesives Self Adhesives Digital Imaging Digital imaging Functional papers Casting Co
Slide 34: Paperboard segments North America
Paperboard segments North America Quality Premium Premium Spectro (commercial print, (92 brightness) premium folding carton) 220,000 tons (10%) Performance (88 brightness) 2.1 million tons Performance (45%) Proto and Proto Litho Food service (folding carton and litho & cup stock lamination applicati
Slide 35: Sappi Europe
Sappi Europe Q1 FY22 Q4 FY21 Q1 FY21 Tons sold (‘000) 837 757 658 - Packaging and speciality papers 153 133 122 - Graphic papers 684 624 536 Sales (EURm) 847 589 574 Price/Ton (EUR) 884 778 733 Cost/Ton* (EUR) 871 806 733 Operating profit excluding special items** (EURm) 11 (21) - * Sales less opera
Slide 36: Coated paper deliveries and prices Western Europe
Coated paper Deliveries and prices Western Europe* 1.2 1.1 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 18 Q1 19 Q1 20 Q1 21 CWF demand MCR demand CWF 100 gsm sheets LWC 60 gsm offset reels * Western Europe shipments including export. Source: Cepif
Slide 37: Sappi North America
Sappi North America Q1 FY22 Q4 FY21 Q1 FY21 Tons sold (‘000) 453 418 421 - Pulp 135 107 125 - Packaging and speciality papers 123 130 103 - Graphic papers 195 181 193 Sales (US$m) 512 458 384 Price/Ton (US$) 1,130 1,096 912 Cost/Ton* (US$) 991 940 917 Operating profit excluding special items** (US$m
Slide 38: Coated paper deliveries and prices United States
Coated paper Deliveries and prices United States* 1.2 1.1 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 18 Q1 19 Q1 20 Q1 21 Domestic CWF shipments Domestic CWF purchases RISI price CFS #3 60 lb rolls * US industry purchases defined as industry ship
Slide 39: Sappi South Africa
Sappi South Africa Q1 FY22 Q4 FY21 Q1 FY21 Tons sold* (‘000) 406 316 296 - Pulp 253 156 173 - Packaging and speciality papers 110 120 82 - Graphic papers 43 40 41 Sales* (ZARm) 5,472 3,969 3,222 Price/Ton* (ZAR) 13,478 12,560 10,885 Cost/Ton** (ZAR) 10,251 10,051 9,983 Operating profit excluding spe
Slide 40: Dissolving pulp prices
US$/ton 1,000 1,050 1,100 1,150 1,200 1,250 600 650 700 750 800 850 900 950 Oct 2017 Source: CCF Group. Jan 2018 Apr 2018 Jul 2018 Oct 2018 Dissolving pulp Prices Jan 2019 Imp SW DP Apr 2019 Jul 2019 Oct 2019 Imp HW DP Jan 2020 Apr 2020 Jul 2020 Oct 2020 China origin DP Jan 2021 Apr 2021 Jul 2021 Oc
Slide 41: Textile fibre prices
US$\ton 1,000 1,500 2,000 2,500 3,000 3,500 4,000 0 500 Jan 2018 Source: CCF Group. Apr 2018 Jul 2018 Oct 2018 Textile fibre Prices Cotton 328 Jan 2019 Apr 2019 Jul 2019 Cotton "A" Index Oct 2019 Jan 2020 PSF 1.4 D Apr 2020 Jul 2020 Oct 2020 VSF 1.2 D Jan 2021 Apr 2021 VSF 1.5 D Jul 2021 Oct 2021 Ja
Slide 42: Cash flow
Cash flow US$m Q1 FY22 Q4 FY21 Q1 FY21 Cash generated from operations 236 141 98 Movement in working capital (134) 63 11 Finance costs paid (28) (24) (34) Finance income received 1 1 3 Taxation (paid) refund (4) (5) 11 Cash generated from operating activities 71 176 89 Cash utilised in investing act
Slide 43: EBITDA and operating profit reconciliation to reported operating profit
EBITDA and operating profit Excluding special items* reconciliation to reported operating profit US$m Q1 FY22 Q4 FY21 Q1 FY21 EBITDA excluding special items* 240 177 98 Depreciation and amortisation (79) (85) (82) Operating profit excluding special items* 161 92 16 Special items* – gains (losses) 8
Slide 44: 2025 Sustainability targets: Sappi Europe
2025 Sustainability targets are aligned with United Nation´s Sustainable Development Goals (SDGs) What we need to achieve in Sappi Europe between 2021–2025*: 11%pts Increase share of renewable and clean energy 5% Improvement in specific total energy (GJ/adt) 0 Safety (LTIFR) (own employees) 80% Decl
Slide 45: 2025 Sustainability targets: Sappi North America
2025 Sustainability targets are aligned with United Nation´s Sustainable Development Goals (SDGs) What we need to achieve in Sappi North America between 2021–2025*: Within 5% of Share of renewable baseline or higher and clean energy Baseline = 81.8% 5% Improvement in specific total energy (GJ/adt) 0
Slide 46: 2025 Sustainability targets: Sappi Southern Africa
2025 Sustainability targets are aligned with United Nation´s Sustainable Development Goals (SDGs) What we need to achieve in Sappi Southern Africa between 2021–2025*: 7%pts Increase proportion of renewable and clean energy 9% Improvement in specific total energy (GJ/adt) 0 Safety (LTIFR) (own employ
Slide 47: Innovative R&D focus: unlocking the full potential of each tree
Innovative R&D focus Unlocking the full potential of each tree Graphic papers Packaging and speciality papers Commercial print and publishing Product packaging Technical papers Chemicals from lignin Binding agent Dispersion agent Pulp Emulsion stabiliser Textiles Pharmaceuticals Foodstuffs Fibre com
Slide 48: Thank you
Thank you 48